Investor Presentation - etalongroup.com · capital expenditures; ... or USD 8 per share/GDR Bln RUB TOTAL ASSETS VALUE ... 9 Botanica Construction 47 45 363 1,564 6,670 2,894 2,705

17 APRIL 2018

0

INVESTOR PRESENTATION

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DISCLAIMER IMPORTANT: YOU MUST READ THE FOLLOWING BEFORE CONTINUING

ETALON GROUP 1

+33%

13,605MLN RUB

In 1Q 2018, new contract sales reached 134,075 sqm and RUB 13,605 mln, up by 18% and 33% y-o-y, respectively

SUMMARY

NEW CONTRACT SALES

Source: Company data ETALON GROUP 2

127

The market value of Etalon Group’s portfolio grew by 10% year-on-year in rouble terms and reached RUB 127 bln

PROJECT PORTFOLIO OPEN MARKET VALUE

THS SQM

BLN RUB

+10% +44%

Consolidated revenue increased by 44% year-on-year to RUB 70,645 mln

REVENUE

70,645MLN RUB

NET INCOME

Net income increased by 61% year-on-yearto RUB 7,893 mln

Net income margin increased by 1 p.p and reached 11%

+61%

7,893MLN RUB

2017 ASSETS VALUATION 04

1Q 2018 OPERATING RESULTS 19

APPENDIX 38

1

3

5

CONTENTS

SELECTED PROJECTS 254

FY 2017 FINANCIAL RESULTS 112

2017 ASSETS VALUATION

127 135

The market value of Etalon Group’s portfolio grew by 10% year-on-year in rouble terms and reached RUB 127 bln

Knight Frank valued the Company’s total assets at RUB 135 bln in 2017

The total assets value of the Group amounted to USD 2.3 bln(2), or USD 8 per share/GDR

Bln RUB

TOTAL ASSETS VALUE PER SHARE/GDR

2017 ASSET VALUATION SUMMARY

OPEN MARKET VALUE OF PROJECT PORTFOLIO

TOTAL ASSETS VALUE(1)

THS SQM

ETALON GROUP 5

In 2017, Knight Frank valued newly created construction and maintenance division and its assets at 8.3 bln RUB

8USD per GDR

8.3

(1) Including joint construction and maintenance business

Bln RUB Bln RUB

(2) Exchange rate as of 31.12.2017

VALUE OFCONSTRUCTION AND MAINTENANCE DIVISION


43

55

72

89

104 104

116

2010 2011 2012 2013 2014 2015 2016 2017

Source: Knight Frank estimate as of 31.12.2017 ETALON GROUP 6

+28% +30% +24% +17% 0% +11% +10%

127

PROJECT PORTFOLIO OPEN MARKET VALUE

(1) As % of Unsold NSA, in sqm terms

PROJECT PORTFOLIO OPEN MARKET VALUEBln RUB

BREAKDOWN BY REGION(1)

53%47% 49%51%

ALL PROJECTS CURRENT PROJECTS

Moscow St Petersburg

> Projects are well diversified by locations within both St Petersburg and Moscow

> The current portfolio includes 475 thousand sqm of completed and available for sale property at projects that are completed or still underway, out of which completed and available for sale apartments account for 210 thousand sqm

> Knight Frank estimates potential income from the sale of all completed and available for sale property at RUB 36,939 million,including RUB 25,381 million from the sale of completed and available for sale apartments

COMPLETED AND AVAILABLE FOR SALE PROPERTY


OPERATIONS IN ST PETERSBURG AND MOSCOW

Paveletskiy railway station

ETALON GROUP 7

PROJECTS IN ST PETERSBURG PROJECTS IN MOSCOW

UNDER CONSTRUCTION

DESIGN STAGE

COMPLETED

2

3

5

4

12

13

14

9

10

11

1

8

7

6

1

2

3

4

7

10

119

5

6

8


ETALON GROUP ASSETS VALUE

Source:Knight Frank valuation report as of 31.12.2017 ETALON GROUP 8

PROJECT STATUSTOTAL NSA(‘000 SQM)

UNSOLD NSA (ETALON’S SHARE)(‘000 SQM)(1)

UNSOLDPARKING (LOTS),#

OMV(MLN RUB)

INCOME FROM SALES (MLN

RUB) (2)

CONSTRUCTION BUDGET (MLN RUB)(3)

OUTSTANDING BUDGET(MLN RUB)(3)

CURRENT PROJECTS

ST PETERSBURG

1 Galactica Construction 797 564 3,888 18,425 70,712 48,125 36,995

2 Moscow Gates Construction 235 52 740 4,268 21,733 11,068 1,052

3 Samotsvety Construction 212 79 1,332 5,670 20,104 9,703 1,322

4 Okhta House (Krasnogvardeiskiy District) Construction 141 138 80 4,431 18,254 6,195 6,169

5 House on Blyukhera (Kalininskiy district) Construction 107 92 338 2,014 9,761 5,235 4,825

6 Project on Petrovskiy Island Design stage 77 75 395 6,454 15,032 5,083 4,933

7 Etalon on the Neva (Nevsky district) Construction 76 74 501 1,868 7,153 4,105 4,105

8 Morskaya zvezda Construction 61 31 148 286 3,167 2,351 2,325

9 Botanica Construction 47 45 363 1,564 6,670 2,894 2,705

10 House on Obruchevykh street Construction 42 28 440 1,634 4,967 2,845 1,633

11 Beloostrovskaya Design stage 29 28 235 646 4,166 1,684 1,666

12 House on Kosmonavtov Construction 27 22 198 947 2,560 1,356 1,250

13 Fusion (Project on Krapivniy Pereulok) Construction 14 12 83 607 1,756 985 813

14 Korolyova prospect Design stage 6 6 47 222 556 372 340

TOTAL ST PETERSBURG 1,872 1,247 8,788 49,037 186,591 102,003 70,132

MOSCOW METROPOLITAN AREA (MMA)(4)

1 Emerald Hills Construction 850 227 1,607 12,497 62,040 40,427 6,447

2 Etalon-City Construction 356 94 902 6,041 29,607 20,146 6,039

3 Summer Garden (Dmitrovskoe shosse) Construction 294 177 1,177 7,425 30,491 17,426 11,880

4 Silver Fountain (Alekseevskiy District) Construction 225 206 2,071 10,790 44,227 21,223 19,660

5 Perovo Region Design stage 162 130 1,063 2,729 17,770 9,030 9,030

6 Ryazanskiy Prospect Design stage 145 119 732 2,745 18,576 8,572 8,572

7 Normandy (Losinoostrovskiy District) Construction 131 113 706 4,544 15,691 7,765 6,861

8 Mytishinskiy District Design stage 93 82 322 722 6,864 4,469 4,376

9 Nizhegorodskiy Region Design stage 86 72 734 1,529 9,446 4,821 4,821

10 Golden Star (Budennogo) Construction 85 20 168 1,978 10,536 6,020 680

11 Letnikovskaya Street Design stage 75 75 511 8,188 24,478 7,026 7,005

TOTAL MMA 2,502 1,314 9,993 59,189 269,726 146,925 85,370

TOTAL CURRENT PROJECTS 4,374 2,562 18,781 108,226 456,316 248,927 155,502

COMPLETED PROJECTS

Residential property in completed projects 2,005 237 4,803 17,775 141,022

Completed stand-alone commercial properties 24 19 55 924 -

TOTAL COMPLETED PROJECTS 2,030 257 4,858 18,699 141,022

TOTAL ETALON GROUP PROJECT PORTFOLIO 6,403 2,818 23,639 126,925 597,338 248,927 155,502

PRODUCTION UNIT

Construction and Maintenance Division 8,272

TOTAL ASSETS VALUE 6,403 2,818 23,639 135,197 597,338 248,927 155,502

(1) Including parking. Parking area in launched projects with partially sold parking lots is calculated as 30 sqmper 1 parking place.

(2) Income from sales includes potential and received incomes as of 31.12.2017 (3) Excluding land acquisition costs (4) Moscow, New Moscow and Moscow region within 30 km from Moscow Ring Road


UNIFIED CONSTRUCTION AND MAINTENANCE DIVISION OVERVIEW

ETALON GROUP 9

REORGANISATION OF CONSTRUCTION AND MAINTENANCE UNITS

MULTIPLE GENERAL AND SUB-CONTRACTORS

landacquisition

projectmanagement

sales

materialsproduction

equipmentfleet

construction

fit-out andfurnishing

ongoingmaintenance

DEVELOPMENT

THRIDPARTY

CONTACTORS

CONSTRUCTION AND MAINTENANCE COMPANY

design

design materialsproduction

equipmentfleet construction fit-out and

furnishing

ongoingmaintenance

UNIFIED DIVISION

4 office buildings with total area of 20 ths sqm

The brick plant's production capacity is 42 mln bricks per year

1.5 mln sqm currently under construction, with potential capacity up to 2.4 mln sqm

4.3 mln sqm of residential & commercial area and 17.1 thsparking places under maintenance as of 31.12.2017

62 Liebherr and Wolff tower cranes

OVERVIEW OF UNIFIED DIVISION

The concrete plant production capacity is over 180 ths m3 of ready-mix concrete and 40 ths m3of concrete products per year


ETALON GROUP 10

(2) Not related to Etalon Group projects

VALUATION HIGHLIGHTS

> 21 legal entities including general contractors, subcontractors, brick and concrete structures production facilities, a real estate broker, ongoing maintenance and service companies, office premises

> Completed reorganisation and finished transition to new business model with a unified construction and maintenance division will improve efficiency and decrease costs, and is expected to boost the division’s financial performance

MLN RUB

2018E 2023E

Total revenue 27,756 38,122

External revenue (2) 12,488 15,682

Gross profit 2,020 2,918

External gross profit (2) 1,153 1,644

Gross margin 7% 8%

Net profit 742 1,276

(1) Knight Frank estimate as of 31.12.2017

8.3Bln RUB

Knight Frank valued the Company’s newly created construction and maintenance division for the first time in 2017. This valuation included the following assets:

CONSTRUCTION AND MAINTENANCE DIVISION KEY FINANCIAL ESTIMATES(1)

UNIFIED CONSTRUCTION AND MAINTENANCE DIVISION VALUATION


FY 2017 FINANCIAL RESULTS

ETALON GROUP 12

IFRS 15 ADOPTION

FINANCIAL RESULTS NOW BETTER ALIGNED WITH ETALON GROUP’S ACTUAL OPERATING PERFORMANCE


BEFOREIMPLEMENTATION

Revenue from pre-sales of apartments and other contracted premises before construction completion was only recognisedupon completion

AFTERIMPLEMENTATION

Revenue from sales of apartments and other contracted premises will be recognised as a percentage of completion (PoC) while construction is ongoing

PERCENTAGE OF COMPLETION

30

60

90 90

1st year 2nd year 3rd year

30

60

90

6

1st year 2nd year 3rd year

20% 60% 100%

30×20%

Cumulative sales

Revenue recognised

30

Revenue90×100%

54

60×60% less already recognisedrevenue

90×100% less already recognised revenue

Cumulative sales

Revenue for the year

Previously recognisedrevenue

In line with global IFRS practice, Etalon Group adopted IFRS 15 “Revenue from Contracts with Customers”, and has applied the new rule starting from 1 January 2017

ILLUSTRATIVE EFFECT FROM IFRS 15 ADOPTION

12,209

18,001

2016 2017

P&LANALYSIS

Source: IFRS financial statements

REVENUE AND GROSS PROFIT UP BY MORE THAN 40%, AND EBITDA UP BY 81% IN 2017

ETALON GROUP 13

CONSOLIDATED REVENUEmln RUB

GROSS PROFITmln RUB

EBITDAmln RUB

49,022

70,645

2016 2017

7,301

13,199

2016 2017

+44% +47% +81%


14.9%

18.7%

2016 2017

EBITDA AND NET INCOME ANALYSIS


PROFITABILITY RECOVERED IN 2017, WITH EBITDA MARGIN UP BY 4 P.P. AND NET MARGIN INCREASING BY MORE THAN 1 P.P.

ETALON GROUP 14

NET INCOMEmln RUB

EBITDA MARGIN NET MARGIN

10.0%11.2%

2016 2017

4,902

7,893

2016 2017

+61%


4,902

6,010

7,893

2016 2017w/o IFRS 15

2017

IMPACT OF IFRS 15


TOP AND BOTTOM-LINE GROWTH WERE STRONG IN 2017 EVEN WITHOUT ADOPTION OF THE NEW IFRS 15 STANDARD

ETALON GROUP 15

NET INCOMEmln RUB

REVENUEmln RUB

49,022

58,901

70,645

2016 2017w/o IFRS 15

2017

+20%

+44%

+23%

+61%


4,454

5,052

9%7%

2016 2017

1,984

2,930

4% 4%

2016 2017

SELLING EXPENSES

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

GENERAL AND ADMINISTRATIVE EXPENSES

OTHER EXPENSES(INCOME)

Selling expenses, mln RUB

Selling expensesas % of revenue

STRICT COST CONTROLS HELPED DECREASE SG&A AND OTHER EXPENSES AS A SHARE OF REVENUE

Other expenses (income), mln RUB

Source: IFRS financial statements ETALON GROUP 16

20172016

(366)

753

G&A, mln RUB

G&A as % of revenue


7,848

9,709

31.12.2016 31.12.2017

(1) Including bank deposits in ST Investments

MAINTAINING STRONG BALANCE SHEET

NET DEBTmln RUB

STRONG LIQUIDITY POSITIONmln RUB

18,054

23,987

10,206

14,125

31.12.2016 31.12.2017

BALANCED GROSS DEBT COMPOSITION(2)

58%

42%

Bank loans

Local bonds

> 100% of debt denominated in RUB

> Average cost of borrowings declined from 12.71% at the end of 2016 to 10.29% at the end of 2017

> In September 2017, Etalon Group subsidiary Etalon LenSpetsSMU placed bonds in the amount of RUB 5 bln with a five-year term and a coupon rate of 8.95%, which is the lowest ever in Etalon Group’s history of public borrowings.

> Interest payments in 2017 decreased by 13% year on-year, despite the increase in gross debt

Total debt Cash and cash equivalents(1)

(2) As of 31.12.2017

ETALON GROUP 17Source: Company data

122

Net debt,mln RUB

Net debt/EBITDA

1.07x 0.74x


OPERATING CASH FLOW ANALYSIS

OPERATING CASH FLOW(1)

mln RUB

(1) Operating cash flow less interest paid (2) Knight Frank estimate as of 31.12.2017Source: IFRS financial statements ETALON GROUP 18

PROJECT ON PETROVSKIY ISLAND

In 2017 we acquired four new projects in Moscow and St Petersburg, including three business class developments, thus increasing the Company’s presence in this higher-price segment

HIGH-END PROJECTS ACQUIRED IN 2017

Location: St Petersburg Class: businessTotal NSA: 77 ths sqmIncome from sales: RUB 15 bln(2)

Planned launch: 2018

BOTANICA

Location: St PetersburgClass: businessTotal NSA: 47 ths sqmIncome from sales: RUB 6.7 bln(2)

Launched: October 2017

PROJECT ON LETNIKOVSKAYA STREET

Location: MoscowClass: businessTotal NSA: 75 ths sqmIncome from sales: RUB 24.5 bln(2)


PROJECT IN NEVSKY DISTRICT

Location: St PetersburgClass: comfortTotal NSA: 76 ths sqmIncome from sales: RUB 7.2 bln(2)


4,040

2,681

2016 2017

POSITIVE OPERATING CASH FLOW FOR SECOND CONSECUTIVE YEAR DESPITE FOUR ACQUISITIONS IN 2017


1Q 2018 OPERATING RESULTS

9,714

12,778

1Q 2017 1Q 2018

10,248

13,605

1Q 2017 1Q 2018

113,646

134,075

1Q 2017 1Q 2018

NEW CONTRACT SALESsqm


CASH COLLECTIONSmln RUB

+18%

IN 1Q 2018 ETALON GROUP STRONGLY OUTPERFORMED ITS 1Q 2017 OPERATING RESULTS

NEW CONTRACT SALESmln RUB

+33% +32%

Source: Company data

> In 1Q 2018, the overall number of contracts increased by 24% year-on-year to 2,573

1Q 2018 OPERATING RESULTS ETALON GROUP 20

AVERAGE PRICERUB/sqm

AVERAGE DOWN PAYMENT%


111,382

109,390

114,582115,806

114,297

90,178

92,676

105,015102,869

101,474

1Q 2017 2Q 2017 3Q 2017 4Q 2017 1Q 2018

apartments total


ETALON GROUP 21

HIGH AVERAGE DOWN PAYMENT COMBINED WITH Y-O-Y RISE IN PRICES LED TO STRONG GROWTH IN CASH COLLECTIONS


74%

81%

1Q '17 1Q '18

466

1,018

1Q 2017 1Q 2018

> Etalon Group offers various mortgage programmes through major banks, including Sberbank, VTB Group, Gazprombank, Raiffeisenbank and Absolut Bank

(1) Weighted average interest rate on mortgage loans given to Russia residents during the month for acquisition of apartments on the primary market, based on CBR data

22% 33% 35%

41%

40%

1Q '17 2Q '17 3Q '17 4Q '17 1Q '18

11.9%

11.3%

10.6%

9.79%

9.75%

Feb2017

May2017

Aug2017

Nov2017

Feb2018

> Joint programmes established with 25 banks and special mortgage agencies to offer flexible financing options:

minimum down payment: 10 – 20%

maturity: 1 – 30 years

interest rate: from 6%

THE SHARE OF MORTGAGE SALES INCREASED BY 18 P.P. Y-O-Y THANKS TO THE CONTINUED DECLINE IN AVERAGE MORTGAGE RATES IN RUSSIA

MORTGAGE SALES

MORTGAGE CONTRACT SALES DEVELOPMENTS

AVERAGE MORTGAGE RATE IN RUSSIA(1)

NUMBER OF MORTGAGE CONTRACTS SIGNED

+118%

ETALON GROUP 22Source: Company data 1Q 2018 OPERATING RESULTS

17%

15%

10%10%

9%

5%

5%

4%4%

4% 6%

2% Botanica

> House on Blyukhera, launched in early 2018, already accounted for an impressive 10% of new sales

> Share of regional sales reached 35%

> Galactica’s share increased to 17% and it became the largest project in terms of new contract sales

> Projects in prime locations account for 65% of Etalon Group’s sales portfolio


SALES PORTFOLIO

NEW CONTRACT SALES PERFORMANCE SUPPORTED BY DIVERSIFICATION OF PORTFOLIO AND SALES IN NEW PROJECTS

1Q 2018 NEW CONTRACT SALES BY PROJECT sqm

1Q 2017 NEW CONTRACT SALES BY PROJECT sqm

Galactica

Emerald HillsSummerGarden

Samotsvety

Etalon City

Moscow Gates

Golden Star

House on Obruchevykh

3%

Tsar’s Capital

3% Normandy

ETALON GROUP 23

Swallow’s Nest

3%

6%

19%

11%6%

7%

15%

5%

4%

12%13%

House on Blyukhera

Other projects

Galactica

Emerald Hills

Etalon City

SummerGarden

Samotsvety

Tsar’s Capital

Swallow’s Nest

Golden Star

Moscow Gates

House on Obruchevykh 2%

Other projectsSilver Fountain


MEETING 2018 GUIDANCE


ETALON IS WELL ON TRACK TO DELIVER ON ITS 2018 GUIDANCE

ETALON GROUP 24

NEW CONTRACT SALESths sqm

CASH COLLECTIONSmln RUB

NEW CONTRACT SALESmln RUB

512

24%

550

2017 2018

50,240

24%

57,000

2017 2018

46,147

24%

53,000

2017 2018

Actual performance

Forecasted performance

> NCS in both sqm and RUB terms has reached 24% of 2018 guidance

> Cash collections have also reached 24% of the guidance

+7% +13% +15%


SELECTED PROJECTS


ETALON GROUP 26

GALACTICA

Total NSA 797 ths sqm

Open Market Value(1)

RUB 18,425 mlnIncome from sales(1)

RUB 70,712 mlnSt Petersburg

DECEMBER 2017

SELECTED PROJECTS

APRIL 2018

ETALON GROUP 27(1) Knight Frank estimate as of 31.12.2017

SAMOTSVETY





DECEMBER 2017

SELECTED PROJECTS

APRIL 2018

HOUSE ON BLYUKHERA

Total NSA107 ths sqm

St Petersburg

DECEMBER 2017

ETALON GROUP 28



RUB 9,761 mln


SELECTED PROJECTS

APRIL 2018

BOTANICA

VISUALISATION

ETALON GROUP 29

Total NSA47 ths sqm




SELECTED PROJECTS(1) Knight Frank estimate as of 31.12.2017

APRIL 2018

HOUSE ON OBRUCHEVYKH STREET






DECEMBER 2017

SELECTED PROJECTS

APRIL 2018

HOUSE ON KOSMONAVTOV

Total NSA27 ths sqm

St Petersburg

VISUALISATION

ETALON GROUP 31


RUB 947 mlnIncome from sales(1)

RUB 2,560 mln


SELECTED PROJECTS

APRIL 2018

FUSION



RUB 607 mlnIncome from sales(1)


VISUALISATION

ETALON GROUPSELECTED PROJECTS 32(1) Knight Frank estimate as of 31.12.2017

APRIL 2018

EMERALD HILLS





RUB 62,040 mlnMoscow region

DECEMBER 2017APRIL 2018

SELECTED PROJECTS

ETALON CITY





RUB 29,607 mlnMoscow


SELECTED PROJECTS

SUMMER GARDEN






APRIL 2018 DECEMBER 2017

SELECTED PROJECTS

SILVER FOUNTAIN







SELECTED PROJECTS

NORMANDY






APRIL 2018 DECEMBER 2017

SELECTED PROJECTS

APPENDIX

63%

28%

9%

PRESENCE IN RUSSIA’S LARGEST MARKETS> Focus on middle class residential real

estate in Moscow and St Petersburg

> 11% CAGR for deliveries over 2010-2017(1)

STRONG DELIVERY TRACK RECORD> Over 30 years of construction &

development experience

> 5.8 mln sqm commissioned

TRUE VERTICAL INTEGRATION> Strategic vertical integration in key value-

added segments of property development enables the Company to control costs, quality and timing

> 5 ths employees

> Country-wide sales network covering 52 cities

DIVERSIFIED PROJECTS PORTFOLIO> Project Portfolio of 2.82 mln sqm(2)

> Project Portfolio sufficient until 2022

> Projects well diversified by locations within both St Petersburg and Moscow

AT A GLANCELIQUIDITY AND CREDIT RATINGS> Secure liquidity position supported

by pre-sales cash collections model

> Low leverage: 0.74x net debt / EBITDA(3)

> Credit rating by S&P: B+/B(4)

CORPORATE GOVERNANCE> 10 BoD members, 7 NEDs

> Board of Directors consists of professionals with broad range of experience and expertise, ensuring that the interests of all groups of shareholders are appropriately represented

> Monthly visual updates on projects, quarterly trading updates and semi-annual financial reporting

> Official guidance on deliveries and new contract sales

> Dividend policy aims to pay out 40% to 70% of IFRS net profit semi-annually

PROJECT PORTFOLIO COMPOSITION(2)

LSE ticker ETLN:LI

Current share price 2.88 (16.04.2018)

Market Capitalisation USD 840.2 mln

Total Assets Value(by Knight Frank)(2)

RUB 135,197 mln(31.12.2017)

underdevelopment

completed projects

projects at design stage

ETALON GROUPAPPENDIX 39(1) Company operating results

(2) Knight Frank valuation report as of 31.12.2017

(3) IFRS financial statements for the year ended 31.12.2017

(4) 'B+' long-term & ‘B’ short-term corporate credit ratings of Etalon LenSpetsSMU (last reconfirmed on 05.07.2017)

TOWER CRANES (2)

STRATEGIC VERTICAL INTEGRATION

(1) Brick plant and concrete products plant (2) 62 tower cranes (Liebherr and Wolff). Data as of 31.12.2017

ETALON OPERATES IN EVERY STAGE OF THE PROPERTY DEVELOPMENT PROCESS, WHICH ENABLES CONTROL OVER COSTS, QUALITY AND TIMING

CONTROL OVER COSTS, QUALITY AND TIMELY DELIVERY OF PROJECTS

BUSINESS STABILITY AND LOWER RISK OF DEPENDENCE ON COUNTERPARTIES

UNDERSTANDING OF CUSTOMER NEEDS THANKS TO NATIONWIDE SALES NETWORK

LAND ACQUISITION ANDPERMITS

DESIGN

CONSTRUCTION MATERIALS (1)

CONSTRUCTION, CONTRACTING ______AND COMMISSIONING

SALES AND MARKETING

ONGOING MAINTENANCE ANDSERVICE

Effective capital recycling

INDEPENDENCE FROM SUPPLIERS, BUT ONLY IN CRUCIAL AREAS

Funding

ETALON GROUP 40APPENDIX

BOARD OF DIRECTORS REPRESENTS INTERESTS OF ALL INVESTOR GROUPS

(1) Title granted by President of Russia

FOUNDINGSHAREHOLDERS

NON-EXECUTIVE DIRECTORS

VIACHESLAV ZARENKOV

President, CEO and Founding shareholder

EXPERIENCE AND AWARDS• 47 years of experience in construction industry• Honoured builder of Russia(1)

EDUCATION• Institute of Civil Engineering, St Petersburg University of Internal Affairs • PhD in Economics, PhD in Technical Sciences, PhD in Architecture, Professor

DMITRY ZARENKOV

Chairman of the Board of Directors

EXPERIENCE AND AWARDS• 20 years of experience in construction industry• Honoured builder of Russia(1); Certificate of Honourof the Ministry of Regional DevelopmentEDUCATION• Institute of Aeronautical Instrumentation, St Petersburg University of Architecture & Civil Engineering, St Petersburg University of Internal Affairs• PhD in Engineering

EXECUTIVE DIRECTORS

KIRILLBAGACHENKO

Deputy CEO and Vice President

EXPERIENCE AND AWARDS• 12 years’ experience in corporate finance and asset management• Previously held position of senior equity portfolio manager at TKB BNP Paribas Investment Partners• In 2013 voted one of the top-3 portfolio managers in Russia by Thomson Reuters Extel SurveyEDUCATION• St Petersburg State University of Economics and Finance

DMITRY KASHINSKIY

First Vice President and COO

EXPERIENCE AND AWARDS• Over 15 years of experience in construction industry• Worked at Barkli and AFI Development (Russia), where he served as CEOEDUCATION• Moscow Aviation Institute

MICHAEL JOHN CALVEY

Senior partner at Baring Vostok

EXPERIENCE AND AWARDS• Member of the board of Europlan, Volga Gas, Gallery Media Group• Worked at EBRD, Salomon Brothers, SovlinkCorporation• Ex-Member of the board of CTC Media, Golden Telecom, Burren EnergyEDUCATION• University of Oklahoma and London School of Economics

ALEXEI KALININ

Partner at Baring Vostok

EXPERIENCE AND AWARDS• With Baring Vostok since 1999• Worked at Alfa-Bank and Alfa Capital• Chairman of the Board of Directors at Volga Gas, member of the board at Samarenergo and other companiesEDUCATION• Moscow Power Engineering University• PhD in Engineering

INDEPENDENT NON-EXECUTIVE DIRECTORS

BORIS SVETLICHNY

Independent Non-Executive Director

EXPERIENCE AND AWARDS• Over 27 years of experience in finance and senior management with international and Russian companies• Recent experience included CFO position at Orange in Russia, VP for Finance at Vimpelcomand CFO at Golden Telecom • EDUCATION• University of Massachusetts (BBA in Accounting), Carnegie-Mellon University (MBA)

MARTIN COCKER


CHARALAMPOS AVGOUSTI


MARIOS THEODOSIOU


EXPERIENCE AND AWARDS• 10 years of legal experience in the real estate, corporate and banking sectors• Founder and Managing Director of Ch. Avgousti & Partners LLC (Advocates & legal consultants) • Board member at Cyprus Telecommunication Authority (CYTA), member of the Advisory council of Limassol for the Central Cooperative Bank EDUCATION• Northumbria University Newcastle (LLM in International Commercial Law), Democritus University of Thrace

EXPERIENCE AND AWARDS• Over 20 years of experience in audit, 7 years -in construction industry• Runs his own development business in Portugal• Worked at Deloitte & Touche, KPMG and Ernst & Young in Russia, Kazakhstan and UKEDUCATION• University of Keele

EXPERIENCE AND AWARDS • Experienced professional in marketing and strategy, affiliated with American Marketing Association (AMA) and Academy of International Business • Member of the Working Group on Economic Matters for Cyprus talks• In 2015 won Excellence in Global Marketing Research Award from AMA EDUCATION• University of Cyprus; University of Wales, Cardiff (PhD, International Marketing and Strategy)


Etalon Group

60.8%

30.7%

CORPORATE GOVERNANCE AND SHAREHOLDING STRUCTURE

CORPORATE GOVERNANCE STRUCTURE

GENERAL SHAREHOLDERS MEETING

BOARD OF DIRECTORS

• Chairman (D. Zarenkov)

• 3 Executive Directors

• 6 Non-Executive Directors, including 4 Independent Directors

MANAGEMENT TEAM

BOARD COMMITTEES

Strategy Committee

Remuneration & Nomination Committee

Audit Committee

Information Disclosure Committee

SHAREHOLDER STRUCTURE(1)

(1) As of 13 April 2018

Free float

Baring Vostok

Zarenkovfamily

1.9%

5.7%

ETALON GROUP 42Source: Company data APPENDIX

0.9%Management

REGIONAL INCOME PER CAPITA TO RUSSIA AVERAGE(2)

Nenets AD 2.2xChukotka 2.0x

Moscow 1.9xYamalo-Nenets AD 1.9xSakhalin region 1.6xMagadan region 1.5xKhanty-Mansi AD 1.4xMoscow region 1.3xKamchatskiy krai 1.3xSt Petersburg 1.3xYakutia 1.3xKhabarovskiy krai 1.2xMurmansk region 1.2xSverdlovsk region 1.1xPrimorskiy krai 1.1xRussia average

POWERFUL SALES NETWORK ACROSS THE COUNTRY

(1) Source: Company data for 1Q 2018 (2) Average monthly cash income per capita, Rosstat’s estimates for FY 2017

REGIONAL POPULATION ACTIVELY BUYS APARTMENTS IN MOSCOW AND ST PETERSBURG

> Etalon Group’s sales force focuses on regions with the highest per capita income levels> Key markets: St Petersburg and Moscow> 52 cities covered with eight sales offices in St Petersburg and 22 more sales offices nationwide> External professional marketing and sales service agents engaged nationwide

ETALON GROUP’S REGIONAL SALES GEOGRAPHY(1)

THE GROUP’S FLATS ARE SOLD IN 14 OF RUSSIA’S 15 MOST AFFLUENT REGIONS

NATIONWIDE SALES & MARKETING NETWORK SUPPORTS SUSTAINABLE CONTRACT SALES

REGION SHARE OF TOTAL CONTRACTS

Leningrad region 2.8%

Yamalo-Nenets AD 1.8%

Murmansk region 1.5%

Khanty-Mansi AD 1.4%

Khabarovsk Krai 1.3%

Krasnoyarsk Krai 1.2%

Primorsky Krai 1.1%

Krasnodar Krai 0.9%

Vladimir Oblast 0.7%

Other Russian regions 21.6%

Foreigners 1%

TOTAL 35.2%

Etalon Group’s sales offices / representatives

Established relationships / partnerships with local sales agencies

Monchegorsk

Krasnodar

Murmansk

Apatity

Severodvinsk

Siktivkar

Ukhta

Perm

Naryan-Mar

Tolyatti

Samara

Arkhangelsk

NadimNoviy Urengoy

Norilsk

Gubkinsky

Khanty-MansiyskSurgut

SPMA

MMA

Kamensk Uralsky

Ekaterinburg

Snezhinsk

Chelyabinsk Omsk

Novosibirsk

Novokuznetsk

Tashtagol

Nizhnevartovsk

KrasnoyarskIrkutsk

Nefteyugansk

Tyumen

Mirniy

Ust-Ilimsk

Chita

Komsomolsk-on-Amur

Yakutsk

Magadan

Kholmsk

Uzhno-Sakhalinsk

Korsakov

Petropavlovsk-Kamchatsky

Vladivostok

KhabarovskBlagoveshchensk

Ussuriysk

ETALON GROUP 43

Etalon Group’s target regions

Cherepovets

Elizovo

Kemerovo

Ulyanovsk

APPENDIX

0 5 10 15 20 25 30

8%

15%

23%

49%

5%

16%

17%

19%

43%

5%

6%

8%

8%

14%

56%Construction

Project management 2%

TYPICAL PROJECT COST STRUCTURE

MATERIALS COST STRUCTURE(1)

RUB 12,000-18,000 per sqm of NSA

Infrastructure

Land acquisition

Interest expense

Sales costs

Design

CONSTRUCTION COST STRUCTURE(1)

RUB 29,000-39,000 per sqm of NSATOTAL COST STRUCTURE(1)

RUB 59,000-72,000 per sqm of NSA

Other 1%

Materials

Wages

Overhead expenses(2)

VAT accrued

Machinery

Other

Metal products

Cement

Crushed granite

Bricks 3%Sand 2%

(1) Source: Company estimates for typical project based on current portfolio average. Actual breakdown per project is subject to significant variation due to a number of factors.

(2) Including payroll tax

TYPICAL PROJECT LIFECYCLE

Predevelopment

Zero cycle works

Construction works

Facade works

Fit out works

MEP systems

Engineering facilities

Urban landscaping

CONSTRUCTION TIMELINE, MONTHS

43%

10 months 11%

10 months 5%

2%

10 months

3%

7%

20 months

21 months

8 months 3%

10%

64%

∑ share

100%CO

NS

TR

UC

TIO

N S

TA

GE

53%

14%

69%

6 months

15%23 months 98%

83%


INCOME STATEMENT

ETALON GROUP 45

MLN RUB 2015 2016 2017

Revenue 42,404 49,022 70,645

Cost of sales (29,405) (36,813) (52,644)

Gross profit 12,999 12,209 18,001

General and administrative expenses (4,348) (4,454) (5,052)

Selling expenses (1,411) (1,984) (2,930)

Other expenses, net (991) (753) 366

Results from operating activities 6,249 5,018 10,385

Finance income 1,686 1,857 1,712

Finance costs (504) (319) (1,680)

Net finance income 1,182 1,538 32

Profit before income tax 7,431 6,556 10,417

Income tax expense (2,002) (1,654) (2,524)

Profit for the period 5,429 4,902 7,893

Profit attributable to:

Owners of the Company 5,399 4,902 7,890

Non-controlling interest 30 - 3


APPENDIXSource: IFRS financial statements

BALANCE SHEET

ETALON GROUP 46

MLN RUB 2015 2016 2017

ASSETS

Non-current assets

PP&E 2,479 2,889 3,085

Investment property 538 561 333

Other long-term investments 578 545 739

Trade and other receivables 3,303 5,063 5,867

Deferred tax assets 1,159 1,414 2,173

Other non-current assets 5 - -

TOTAL NON-CURRENT ASSETS 8,062 10,472 12,197

Current assets

Inventories 67,722 71,261 78,122

Contract assets, trade and other receivables 18,227 21,409 30,184

Short-term investments 733 793 185

Cash and cash equivalents 11,532 10,206 14,125

Other current assets 7 - -

TOTAL CURRENT ASSETS 98,221 103,669 122,616

TOTAL ASSETS 106,283 114,141 134,813

EQUITY AND LIABILITIES

Equity

Share capital 14,999 15,070 14,103

Retained earnings 39,697 43,052 48,702

TOTAL EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY 54,696 58,122 62,805

Non-controlling interest 147 28 -

TOTAL EQUITY 54,843 58,150 62,805

Non-current liabilities

Loans and borrowings 13,138 12,415 21,418

Trade and other payables 923 859 2,546

Provision 117 107 102

Deferred tax liabilities 1,810 1,557 2,941

TOTAL NON-CURRENT LIABILITIES 15,988 14,938 27,007

Current liabilities

Loans and borrowings 6,276 5,639 2,569

Contract liabilities, trade and other payables 25,630 33,666 40,569

Provisions 3,546 1,748 1,863

TOTAL CURRENT LIABILITIES 35,452 41,053 45,001

TOTAL EQUITY AND LIABILITIES 106,283 114,141 134,813


CASH FLOW STATEMENT

ETALON GROUP 47

MLN RUB 2015 2016 2017

OPERATING ACTIVITIES


Adjustments for:

Depreciation 406 434 340

Gain on disposal of PP&E (65) (52) (113)

Gain on disposal of investment property - (267) (27)

Impairment gain/(loss) on investment property 215 (41) -

Impairment loss on inventories 514 430 819

Equity-settled share-based payment transactions - - 221

Finance income, net (1,182) (1,538) (32)

Income tax expense 2,002 1,654 2,524

CASH FROM OPERATING ACTIVITIES BEFORE CHANGES IN WORKING CAPITAL 7,319 5,522 11,625

Change in inventories (8,255) (1,780) (1,009)

Change in accounts receivables (3,958) (3,746) (6,953)

Change in accounts payable 2,369 7,812 161

Change in provisions 1,315 (1,808) 112

Change in other current assets 59 - -

Change in contract assets - - (203)

Change in contract liabilities - - 1,329

Income tax paid (2,146) (1,960) (2,381)

Interest paid (2,516) (2,603) (2,257)

NET CASH FROM/(USED IN) OPERATING ACTIVITIES (5,813) 1,437 424

INVESTING ACTIVITIES

Proceeds from disposal of non-current assets 188 93 294

Proceeds from disposal of investment property - - 232

Interest received 1,311 1,153 918

Acquisition of PP&E (369) (711) (707)

Loans given (123) (435) (60)

Loans repaid 66 25 93

(Acquisition)/disposal of other investments 1,155 242 122

NET CASH FROM /(USED IN) INVESTING ACTIVITIES 2,228 367 892

FINANCING ACTIVITIES

Acquisition of non-controlling interest (20) (94) (29)

Proceeds from borrowings 9,480 9,016 15,889

Repayments of borrowings (6,281) (10,404) (10,009)

Acquisition of own shares 16 - (628)

Dividends paid (2,452) (1,504) (2,542)

NET CASH FROM/(USED IN) FINANCING ACTIVITIES 743 (2,986) (2,681)

Net increase/(decrease) in cash and cash equivalents (2,842) (1,182) 3,997

Effect of FX rate fluctuations (257) (144) (78)

Cash & cash equivalents at the end of the period 11,532 10,206 14,125


EBITDA CALCULATION

ETALON GROUP 48

MLN RUB 2015 2016 2017

Comprehensive income 5,429 4,902 7,893

Income tax expense 2,002 1,654 2,524

Interest expense on loans and finance lease 19 12 912

Net foreign exchange loss 138 78 79

Interest income on bank deposits (1,089) (839) (505)

Interest income on loans and receivables (222) (314) (413)

Net foreign exchange gain - -

Bank fees and commissions 95 133 122

Interest in cost of sales 897 1,241 2,247

DEPRECIATION: 406 434 340

Depreciation in cost of goods sold (Note 13 PP&E) 284 321 261

Depreciation to selling expenses (Note 13 PP& E) 6 4 10

Depreciation to general and administrative expenses (Note 13 PP&E) 63 62 47

Depreciation to investment property (Note 14 Investment property) 48 42 22

Depreciation to other non-current assets 5 5

EBITDA 7,675 7,301 13,199


ETALON GROUP PLC

2-4 CAPITAL CENTREARCH. MAKARIOU III AVENUENICOSIA | CYPRUS

TEL: +44 (0)20 8123 1328FAX: +44 (0)20 8123 1328EMAIL: [email protected]

INVESTOR PRESENTATION

Investor Presentation - etalongroup.com · capital expenditures; ... or USD 8 per share/GDR Bln RUB TOTAL ASSETS VALUE ... 9 Botanica Construction 47 45 363 1,564 6,670 2,894 2,705

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